Cuts in U.S. spending on global intelligence gathering operations concern security experts, who warn the reductions may prove detrimental to U.S. defense interests.

Warnings of the potential effects of smaller budgets on defense and security operations worldwide came as the industry weighed consequences for business in an already difficult economic climate.

Global U.S. expenditure on intelligence gathering operations isn't small and far outstrips figures that other countries are either known to spend or admit to having set aside.

But, given the U.S. spy agencies' international remit, the cuts are significant, published data indicated.

Total spending in 2012 will represent the second year of a steady decline that follows a decade of historically high expenditure on intelligence gathering operations since the Sept. 11, 2001, attacks on the United States.

Data released by the Office of the Director of National Intelligence indicated total spending in fiscal 2012 dropped to $53.9 billion from $54.6 billion in 2011.

The U.S. government fiscal year ends Sept. 30 and the Office of the Director National Intelligence overseas all other spying entities, including the CIA.

Military intelligence budgets under the Pentagon's separate Military Intelligence Program also dropped to $21.5 billion from about $24 billion in fiscal 2011, data showed.

Both the government and Congress sources have said the figures are purposefully selective and no further data should be expected.

A Pentagon statement said, "The department determined that releasing this top line figure does not jeopardize any classified activities within the MIP," adding, "No other MIP budget figures or program details will be released, as they remain classified for national security reasons."

Industry analysts say the cuts are understandable with the military drawdown in Iraq and Afghanistan. But, they warn, the cuts do leave the industry with greater challenges on their balance sheets and build pressures on the businesses to diversify and find alternative sources of revenue.

Both industry and defense analysts say the cuts highlight risks that prioritizing to manage with available funding will create blind spots.

"We're going to have less capability in 10 years than we have today," Director of National Intelligence James Clapper warned in a November 2011 interview with Bloomberg News and other organizations.

The 16 departments, agencies and offices that comprise the U.S. intelligence community spend a combined $80 billion a year.

The planned cuts translate into $25 billion less spending on intelligence related operations over the next 10 years -- a potential major blow to industries that supply goods and services for the sector's activities.

Clapper said in a speech that 2013 would signal the end of the boom time for the intelligence industry.

"We've experienced 10 years of growth -- actually a fairly easy proposition, when you think about it, for the intelligence community, because every year all they had to do was hand out more money and more people," he said.

New challenges for the government include a more judicious use of funds to secure best possible results. That need extends to secure storage of data as well as cloud computing is embraced by increasing numbers of government agencies.

Declassified documents posted on the website of the Federation of American Scientists also showed increased appropriations and emphasis on the work of technical intelligence agencies, including the National Reconnaissance Office, which builds and operates spy satellites, and the National Geospatial-Intelligence Agency, which analyzes intelligence imagery.

Analysts say the reduction in spending means less money will be available for research and development of new space-based intelligence gathering equipment and other technological capabilities, hiring specialists to analyze new data, and being able to afford more human spies in some of the less covered regions, or in an emergency.

Photograph of Spy Satellite IGS-1B Captured in Its Final OrbitsLos Angeles CA (SPX) Oct 29, 2012IGS-1B is a Japanese Information Gathering Satellite that was launched on March 28, 2003 together with its companion IGS-1A on board a H2A rocket. Both satellites were delivered into a 486 x 491 km orbit with an inclination of 97 degrees. The satellites orbited within 37 minutes of each other.
In 2007 it was announced by officials that IGS-1B was malfunctioning due to a loss of power. Sinc ... read more

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